ITAT Pune Judgments — February 2023

The Tribunal held that the addition of Rs. 76,78,921/- as unexplained payment for AY 2013-14 was justified in the assessee's hands. The Tribunal reasoned that even if the amount was assessed in the company's hands, the nexus of the money belonging to the assessee was established, and the purpose of the Act is to assess correct income in the right hands, citing ITO vs. C. Atchaiah. The assessee's argument of double addition was rejected as the assessee's own reply to the CIT(A) indicated the amount was not an advance or loan to the company. Regarding the interest disallowances for both assessment years, the Tribunal deleted them, holding that the CIT(A)'s appellate jurisdiction does not extend to adding income not considered in the original assessment, relying on CIT vs. Shapoorji Pallonji Mistry, CIT vs. Union Tyres, and CIT vs. Sardarilal & Co. The addition of Rs. 1,68,278/- for unexplained jewellery investment for AY 2014-15 was deleted. The Tribunal granted the telescoping benefit and noted irregularities in valuation, as the inventory showed a different quantity and value. The assessee's appeal for AY 2013-14 was partly allowed, and the appeal for AY 2014-15 was allowed.

The Tribunal held that the addition of Rs. 76,78,921/- as unexplained payment for AY 2013-14 was justified in the assessee's hands. The Tribunal reasoned that even if the amount was assessed in the company's hands, the nexus of the money belonging to the assessee was established, and the purpose of the Act is to assess correct income in the right hands, citing ITO vs. C. Atchaiah. The assessee's argument of double addition was rejected as the assessee's own reply to the CIT(A) indicated the amount was not an advance or loan to the company. Regarding the interest disallowances for both assessment years, the Tribunal deleted them, holding that the CIT(A)'s appellate jurisdiction does not extend to adding income not considered in the original assessment, relying on CIT vs. Shapoorji Pallonji Mistry, CIT vs. Union Tyres, and CIT vs. Sardarilal & Co. The addition of Rs. 1,68,278/- for unexplained jewellery investment for AY 2014-15 was deleted. The Tribunal granted the telescoping benefit and noted irregularities in valuation, as the inventory showed a different quantity and value. The assessee's appeal for AY 2013-14 was partly allowed, and the appeal for AY 2014-15 was allowed.

The Tribunal held that the assessee's first ground regarding the absence of incriminating material for the Section 153A assessment was not sustainable. The Tribunal noted that the AO had issued a show cause notice based on seized material and that the assessment year 2013-14, being prior to the search action on 20.08.2014, qualified as an 'abated' assessment under the second proviso to Section 153A(1). Therefore, this legal argument was rejected. Regarding the second and third grounds concerning the enhancement of the Section 54GB exemption disallowance, the Tribunal found merit in the assessee's plea. The CIT(A) issued his enhancement notice on 15.06.2018, which was the last date of hearing, and his main order followed on 21.06.2018. The Tribunal considered this a clear violation of the principles of natural justice. Consequently, the Tribunal restored the issue of Section 54GB deduction claim back to the Assessing Officer for fresh adjudication. The assessee was directed to bear the onus of filing all necessary details for the Section 54GB claim in the consequential proceedings. The appeal was partly allowed for statistical purposes.

For AY 2017-18, the Tribunal held that the Assessing Officer's assessment order dated 27.12.2019 and the subsequent section 154 rectification order were invalid for non-compliance with CBDT Circulars 19/2019 and 27/2019, which mandate the inclusion of a DIN and Order number. The Tribunal followed its own decision in Shri H.K. Suresh vs. PCIT, holding that a subsequent intimation cannot cure the defect of an order being deemed to have never been issued. Consequently, the impugned assessment and rectification orders were quashed, and the assessee's appeals were allowed. For AY 2018-19, the Tribunal held that the assessee's argument for telescoping the addition of Rs. 1,66,40,000/- under section 69A was valid. The Tribunal noted that the seized material did not contain clear entries to support the Revenue's presumption of correctness under section 292C. Furthermore, relying on CBDT circulars dated 10.03.2003 and 18.12.2004, the Tribunal held that admissions made by a searched party during search or survey have no significance in the absence of supportive evidence. The Tribunal accepted the assessee's pleadings and allowed the assessee's appeal (ITA No.47/PUN/2021), dismissing the Revenue's cross-appeal (ITA No.59/PUN/2021) as a corollary. The assessee's three appeals were allowed, and the Revenue's appeal was dismissed.

For AY 2017-18, the Tribunal held that the Assessing Officer's assessment order dated 27.12.2019 and the subsequent section 154 rectification order were invalid for non-compliance with CBDT Circulars 19/2019 and 27/2019, which mandate the inclusion of a DIN and Order number. The Tribunal followed its own decision in Shri H.K. Suresh vs. PCIT, holding that a subsequent intimation cannot cure the defect of an order being deemed to have never been issued. Consequently, the impugned assessment and rectification orders were quashed, and the assessee's appeals were allowed. For AY 2018-19, the Tribunal held that the assessee's argument for telescoping the addition of Rs. 1,66,40,000/- under section 69A was valid. The Tribunal noted that the seized material did not contain clear entries to support the Revenue's presumption of correctness under section 292C. Furthermore, relying on CBDT circulars dated 10.03.2003 and 18.12.2004, the Tribunal held that admissions made by a searched party during search or survey have no significance in the absence of supportive evidence. The Tribunal accepted the assessee's pleadings and allowed the assessee's appeal (ITA No.47/PUN/2021), dismissing the Revenue's cross-appeal (ITA No.59/PUN/2021) as a corollary. The assessee's three appeals were allowed, and the Revenue's appeal was dismissed.

The Tribunal held that the process undertaken by the assessee for converting grapes into raisins is not an ordinarily employed process by a cultivator to render the produce fit for market. The Tribunal noted that fresh grapes can be sold in their raw stage without any processing. The decisions relied upon by the assessee were distinguished as they involved situations where there was no ready market for the primary produce. The Tribunal emphasized that the onus lies on the assessee to prove that their claim falls within exemption conditions, and the assessee failed to adduce necessary evidence. Furthermore, the process involved manpower, electrical power, buildings, furniture, and chemicals, which are not ordinarily employed by cultivators. The Tribunal concluded that the AO correctly invoked Rule 7 of the Income Tax Rules, 1962, for determining business income. Therefore, the ground of appeal was found to have no merit.

The Tribunal upheld the orders of the CIT(A) for all three assessment years, dismissing the Revenue's appeals. For AY 2008-09, the Tribunal noted that the AO's entire basis for suppressed production was electricity consumption, and no evidence of suppressed production, excess stock, or unrecorded sale/purchase bills was found during the search. The Tribunal found that the AO had made similar additions for AYs 2004-05 and 2009-10, which were deleted by the Tribunal in a prior order (ITA Nos. 1636 and 1637/PUN/2012 dated 30-11-2015). The learned DR conceded that the facts for the current year were similar. Respectfully following the precedent, the deletion of addition was upheld. For AY 2009-10, the Tribunal followed its decision for AY 2008-09 and upheld the deletion of both additions, noting that the working capital addition was consequential. For AY 2010-11, the Tribunal again found the factual scenario similar to earlier years and upheld the deletion of the Section 40A(3) addition, as it was consequential to the suppressed production addition. The ratio decidendi is that additions based solely on electricity consumption for suppressed production, without corroborative evidence found during search, are unsustainable, especially when similar additions have been deleted in prior years.

The Tribunal upheld the orders of the CIT(A) for all three assessment years, dismissing the Revenue's appeals. For AY 2008-09, the Tribunal noted that the AO's entire basis for suppressed production was electricity consumption, and no evidence of suppressed production, excess stock, or unrecorded sale/purchase bills was found during the search. The Tribunal found that the AO had made similar additions for AYs 2004-05 and 2009-10, which were deleted by the Tribunal in a prior order (ITA Nos. 1636 and 1637/PUN/2012 dated 30-11-2015). The learned DR conceded that the facts for the current year were similar. Respectfully following the precedent, the deletion of addition was upheld. For AY 2009-10, the Tribunal followed its decision for AY 2008-09 and upheld the deletion of both additions, noting that the working capital addition was consequential. For AY 2010-11, the Tribunal again found the factual scenario similar to earlier years and upheld the deletion of the Section 40A(3) addition, as it was consequential to the suppressed production addition. The ratio decidendi is that additions based solely on electricity consumption for suppressed production, without corroborative evidence found during search, are unsustainable, especially when similar additions have been deleted in prior years.

The Tribunal upheld the orders of the CIT(A) for all three assessment years, dismissing the Revenue's appeals. For AY 2008-09, the Tribunal noted that the AO's entire basis for suppressed production was electricity consumption, and no evidence of suppressed production, excess stock, or unrecorded sale/purchase bills was found during the search. The Tribunal found that the AO had made similar additions for AYs 2004-05 and 2009-10, which were deleted by the Tribunal in a prior order (ITA Nos. 1636 and 1637/PUN/2012 dated 30-11-2015). The learned DR conceded that the facts for the current year were similar. Respectfully following the precedent, the deletion of addition was upheld. For AY 2009-10, the Tribunal followed its decision for AY 2008-09 and upheld the deletion of both additions, noting that the working capital addition was consequential. For AY 2010-11, the Tribunal again found the factual scenario similar to earlier years and upheld the deletion of the Section 40A(3) addition, as it was consequential to the suppressed production addition. The ratio decidendi is that additions based solely on electricity consumption for suppressed production, without corroborative evidence found during search, are unsustainable, especially when similar additions have been deleted in prior years.

The Tribunal held that the CIT(A)'s direction to allow proportionate deduction under Section 80IB(10) was based on his prior decision for the assessment year 2011-12. The Tribunal noted that this very issue, concerning proportionate deduction in the assessee's own case for assessment year 2011-12, had been decided by a coordinate bench of the Tribunal in ITA No.2080/PUN/2017. In that appeal, the Revenue's appeal was dismissed. The Tribunal, respectfully following the coordinate bench's order, which aligned with the consistent view of several High Courts that allow deduction under Section 80IB(10) on a proportionate basis in similar circumstances, found no reason to interfere with the impugned order. Therefore, the appeal filed by the Revenue was dismissed.